Forex Scalping on ADX and Bollinger Bands
In order to have optimal market conditions for scalping, traders use indicators to see if the market is trending well or if they should wait for better opportunities. One of the indicators used is the ADX (Average Directional Index) indicator. ADX does not forecast the direction of the trend, only the strength of the current trend. A reading below 20 indicates a weak trend, while a trend above 40 indicates a strong trend. A reading just over 20 indicates that the trend is gaining momentum, which could be a good time to get in, if other indicators also indicate it.
Bollinger bands is another indicator used to determine trends. The indicator suggest continuation of trends. Bollinger bands consist of a center line and the two price channels (the bands) above and below the center line. The center line is the same as the exponential moving average. When prices touch the upper band continually the pair is suggested to be overbought indicating a reversal and likewise when the price touches the bottom line, the pair is suggested to be oversold indicating a reversal.
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